Monday, April 29, 2013

From My Notebook, no.9

Adam Smith, “Theory Of Moral Sentiments“, Part
IV.ii.11: 185:

“The same principle, the same love of system, the same
regard to the beauty of order, of art and contrivance, frequently serves to
recommend those institutions which tend to promote the public welfare. When a
patriot exerts himself for the improvement of any part of the public police,
his conduct does not always arise from pure sympathy with the happiness of
those who are to reap the benefit of it. It is not commonly from a fellow–feeling
with carriers and waggoners that a public–spirited man encourages the mending
of high roads. When the legislature establishes premiums and other
encouragements to advance the linen or woollen manufactures, its conduct seldom
proceeds from pure sympathy with the wearer of cheap or fine cloth, and much
less from that with the manufacturer or merchant. The perfection of police, the
extension of trade and manufactures, are noble and magnificent objects. The
contemplation of them pleases us, and we are interested in whatever can tend to
advance them. They make part of the great system of government, and the wheels
of the political machine seem to move with more harmony and ease by means of
them. We take pleasure in beholding the perfection of so beautiful and grand a
system, and we are uneasy till we remove any obstruction that can in the least
disturb or encumber the regularity of its motions. All constitutions of
government, however, are valued only in proportion as they tend to promote the
happiness of those who live under them. This is their sole use and end. From a
certain spirit of system, however, from a certain love of art and contrivance,
we sometimes seem to value the means more than the end, and to be eager to
promote the happiness of our fellow–creatures, rather from a view to perfect
and improve a certain beautiful and orderly system, than from any immediate
sense or feeling of what they either suffer or enjoy. There have been men of
the greatest public spirit, who have shown themselves in other respects not
very sensible to the feelings of humanity.”

Comment

This is an Interesting passage from TMS.It follows directly on from his more
famous passage discussing the “proud and unfeeling landlord” who is “led by an
invisible hand to makes nearly the same distribution of the necessaries of life”
etc.

Smith discusses the phenomenon of state officials or
representatives who get behind schemes using public money to undertake some
project or other (today such a scheme could be about using public money for
devote welfare expenditure to address a social problem):

“When the legislature establishes premiums and other
encouragements to advance the [insert names here] manufactures, its conduct
seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and
much less from that with the manufacturer or merchant.”

From there Smith shows the justification for
government:

“The perfection of police,* the extension of trade and
manufactures, are noble and magnificent objects. The contemplation of them
pleases us, and we are interested in whatever can tend to advance them. They
make part of the great system of government, and the wheels of the political
machine seem to move with more harmony and ease by means of them.’

[* By “police” Smith referred to its 18th
century meaning: ensuring the wherewithal for the subsistence of the community.]

Notwithstanding the ideal, we should note the quite
poor performance of most governments throughout history, which may succeed in
achieving some “noble and magnificent objects” but fail in others like public
health, public safety, and public welfare. That is where the role of the entrepreneurs became so important where they flourished, beginning from the 14th century in Europe, and crucially,

in a civil society that allowed them dignity (see Deirdre McCloskey, "Bourgeois Dignity") in North-west Europe.

Some governments fund magnificent buildings, statues,
public works, and so on, while the bulk of the population is left destitute and exposed to dangers (pestilence, diseases, violence, wars and invasions and the
ravages of natural disasters).

He concludes with a truth for our times too: ”All
constitutions of government, however, are valued only in proportion as they
tend to promote the happiness of those who live under them. This is their sole
use and end.”

How many governments can you identity where they may
be judged to have met that measuring rod?Damn few, I believe, which is, of course, the stuff of political
controversies, in which the ideas of economics play their part.That is why economic ideas are
important.

Sunday, April 28, 2013

On the Funding of Higher Education from Smith’s Time to Ours (see previous post)

“For
some reason I remember that this wasn't so in Smith's day. Wasn't Smith paid by
his students directly? When did the no fees come in for Scotland?” (A comment
from Paul, a regular reader).

Comment

My
response

Paul,

Thank
you for reminding me of the details I did not elaborate upon.

Scotland,
in common with the other countries in the UK did not have government
expenditures on education in the 18th century.These costs were met from the ancient universities own
resources (grants from former pupils and their estates; fees paid by parents;
local charities and such like).

Balliol
College, Oxford,(which Smith
attended) was founded and paid for by the ancient Scottish Balliol family. He
had won a Snell Exhibition as a promising student – it still exists and is well
funded. His mother and guardians may have added something in kind (he was
accompanied on the long journey by horse to Oxford).

Local
charities paid fees and living expenses, especially to students of poorer
families; richer local families paid on their own account.Over a century or two educated Scots
came from a broader spectrum of classes than common in England.

Glasgow
University did not pay their academics all of their annual salaries; it
required students to pay some proportion of their fees direct to each of their
Professors each term. Students elected to attend their classes, a requirement
that Smith approved of because it tended to ensure that professors prepared
their courses to high standards (lazy professors would not attract or keep
students for a large proportion of their incomes and the University would react
to deal with such unpopular professors to protect its reputation and their
fees).

In
the 20th century, direct government expenditure on universities
increased, though student recruitment became more selective towards those whose
families who could afford ever increasing fees, added to by the finances of
well-managed bequests from the past and disbursed by the universities themselves
(as in the main universities, especially Oxford and Cambridge), often
competitively won by individual student pre-entry scholarship examinations from
home and abroad.Local government
schemes also paid the fees and bursaries to local students if they won a place
at a university.Families could
pay these fees direct if they had the resources.

With
the 1960s Robbins Report, governments implemented a massive expansion in
universities and in establishing new university status to long-established higher
education institutions, e.g. The Royal College of Science and Technology in
Glasgow became “Strathclyde” University, where I graduated BA and, later, MSc,
and where yet later I was Senior Lecturer in Economics. Heriot-Watt College in
Edinburgh became “Heriot-Watt” University, where I became a Professor in
Edinburgh Business School (retired, 2005).In between, I was Lecturer in Economics at the newly created
Brunel University and graduated PhD in economics.All three of these universities were founded in that
new Robbins wave.

Associated
with the expansion across the UK were student fees and low annual student
grants, funded and administered by the State, with contributions of fees from
students (unless paid for from competitive grants, bursaries and charities).

From
these new arrangements central government expenditure on higher education
climbed steadily as the proportion of students in each age-cohort grew from 8%
towards 50 per cent.

First,
education and its funding was devolved to the separate countries in the
UK.Secondly, practices begun to
vary in the UK, particularly in Scotland where state funding expanded on both
students and institutions.

I
funded my undergraduate fees as a ‘mature’ student, first by small bursaries
from the state, supplemented by low paid vacation employment. I funded my
postgraduate education by higher paid employment from teaching in universities.

With
greater devolution of state responsibilities to Scotland, the government
decided to remove the veil of so-called student fees (with its substantial
disparate sources) under the postwar changes to direct funding by the state of
all fees to the universities.This
is the situation that continues today.

No
fees are charged to the students at any Scottish University. The situation in
England is quite different, where increasingly higher fees are charged direct
to each individual student, with a plethora of funding sources as before from
the 18th century, when England had only two universities (Oxford and
Cambridge) and Scotland had four, and Scotland always recruited university
places from wider slice of the population.

Friday, April 26, 2013

Adam Smith On the Education of the Poorer Classes

“This is what Adam Smith
believed about education. When he wrote "Wealth of Nations" at the
dawn of the industrial revolution, he didn't think England required a public
education system to train youth in the practical arts of farm labor or industrial
weaving. He advocated the opposite.

The Wealth Of
Nations: In Scotland the establishment of such parish schools has
taught almost the whole common people to read, and a very great proportion of
them to write and account. In England the establishment of charity schools has
had an effect of the same kind, though not so universally, because the
establishment is not so universal.

Smith's educational vision
was practical as well as Liberal. He did not, as an 18th Century Mike Flanagan
may have preferred, advocate for courses like "Geometry for Coal Mines:
The Science of Small Spaces." Perhaps a mill hand would find
practical science useful in his job, or perhaps he'd use that knowledge to
create an innovative device in his spare time.

The Wealth Of
Nations: If in those little schools the books, by which the children
are taught to read, were a little more instructive than they commonly are, and
if...they were instructed in the elementary parts of geometry and mechanics,
the literary education of this rank of people would perhaps be as complete as
it can be.

The goal wasn't
"workforce development." It was to provide enough education so that
every citizen could be intellectually self-sufficient. Learn to read and write,
acquire an understanding of basic mathematics and science, and you can obtain
(as Will Hunting famously observed) an Ivy League education for "a buck
fifty in late charges at the public library."

Yes, American schools have
always offered what might be deemed vocational courses--home ec, shop class,
photography, etc. Most students in an auto shop class are unlikely to become
ASE-certified mechanics. For most, these vocational classes are about learning
general skills that translate to many facets of life--teamwork, problem
solving, a sense of accomplishment that comes from doing a job correctly.

Education for education's
sake serves the individual--but more importantly, it serves the general public.
It's an intellectual foundation that liberates a person of even the most humble
origins to rise above his/her station and allows them, if they so choose, to
reach his/her intellectual potential.”

Comment

Adam Smith strongly
supported the “little schools in every Parish” policy that had existed in Scotland since
the 16th century.England did not have the same or a similar policy.The “little schools” in Scotland were open to all
children of all ranks in Scotland and by the 1700s, Scotland had a
comparatively good record in spreading elementary literacy and numeracy across
the adult population, paid for, partly by parental donations, partly by
charitable contributions, and partly by local state-funding.It also permitted a large pool of
educated youth to be drawn upon for university classes at the four Scottish
universities (Glasgow, Edinburgh, St Andrews and two rival colleges in
Aberdeen), compared to England,where university classes were inits (only) two universities, Oxford and Cambridge.

Scots, still today, remain proud of its
universities, where all students pay no fees to attend, compared to England.

Scotland was also first in
extending university-level technical education to skilled artisans in the 19th
century.For example, my own
university, Heriot-Watt, began as a School of Arts (by which was meant the
manufacturing “arts” of mechanics, chemistry, mathematics and engineering), its
buildings located until 1966 across the road in the same street as the magnificent
Georgian buildings of Edinburgh University. Many of its lectures in the 19th century were delivered part-time by Edinburgh University academics. In time, this new type of
mechanical arts institutes were to spread across Scotland and, later, into England,
for the skilled and artisan classes, required for industrialisation.

Smith, however, was
concerned about the general ignorance of working people across the United
Kingdom, many of whom were not exposed to education at all.He considered this state of affairs a
threat to social stability, a condition in his view for growth.He
writes on this problem in Book V of Wealth Of Nations and seeks to persuade
educated peoples, normally not in contact with the rapidly changing industrial
developments common in his times.

Some (like Chomsky, for
example), mistakenly, argue that Smith had doubts about the future of division
of labour and they quote some paragraphs from Book V of Wealth Of Nations to undermine Smith’s
famous praises for the division of labour in Book I. I think they are mistaken
from a too hasty reading of his statements out of context.

Smith’s Book V remarks are
in a chapter on the education of youth, which in England was particularly
deficient compared to Scotland.The outcome of this neglect was a dangerously ignorant adult population
in respect of political stability (a necessary condition for opulence), who
were liable to bouts of “enthusiasm” (an occasional set of excited behaviours incited by
ignorant demagogues – and religious fanatics – that Smith claimed easily misled
illiterate poor people into pointless troubles).As his readers were by definition liable to be targets of
these disorders, he was trying to persuade them to act to counter-act such
potential mobs by paying small amounts to have all children educated in “little schools” in
every parish in England on the Scottish model, all 60,000 of them.

It took another 100 years
for Parliament to pass an Education Act to establish a schooling system paid
for from taxation, similar to the two-hundred years of the “little
schools” in Scotland, only better funded.

A Brave Outspoken Sceptic Speaks

“I’ve
taken an introductory course on economics. Sadly, the course didn’t instill an
undying faith in the invisible hand of the free market, but nonetheless I
learned some valuable lessons. The most significant of these was the idea of “thinking
at the margins.”

Comment

Which is precisely why the imaginary, so-called, “invisible
hand of the market” adds nothing at all to economic analysis, other than mystical mumbo jumbo.

Press Release from Fife Today about the June 2014 Kirkcaldy Adam Smith Lecture

"World-famous historian Professor Tom Devine has been unveiled as the
guest speaker at the 2013 Adam Smith Lecture.

Professor Devine, who lectures at Edinburgh University, will speak in
Kirkcaldy on Thursday June 6.

In recent years the prestigious Adam Smith Lecture has been delivered by
Kofi Annan, former General Secretary of the United Nations, Professor Alan
Greenspan, former head of the United States Federal Reserve, Mervyn King,
Governor of the Bank of England and James Wolfenson, the president of the World
Bank.

The focus and emphasis of this year’s lecture by Professor Devine will
be on ‘Adam Smith’s Scotland’ and Professor Devine will put the economist’s
life and work in the context of his education and residence in Kirkcaldy.

The professor is not only author of ‘The History of the Scottish Nation’,
but more recently a book on Scottish emigration called ‘To the Ends of the
Earth’.

Gordon Brown MP has once again helped organise the lecture.

He said: “Professor Devine is one of the great historians in Scotland
and will be much welcomed as someone who has got a great reputation for his
ability to talk about Scotland’s history.

“We are delighted that someone as prestigious as Professor Devine has
been prepared to accept our invitation to speak.”

Michael Levack, chairman of the Adam Smith Global Foundation, said “This
will be a major boost to our ambitious programme and cement the strong start we
have made in the work of The Adam smith Global Foundation.”

Martin McGuire, interim principal, Adam Smith College, said: “Events
such as these provide an excellent opportunity for our students to gain
valuable experience.”

I hope to attend the Lecture.Over the last few years I have attended these lectures.I know Professor Tom Divine is an
excellent speaker and an authority on 18TH-Century Scotland and it
is well worth listening to his historical views.

Tuesday, April 23, 2013

Friedman and the Invisible Hand

"A free market
[co-ordinates] the activity of millions of people, each seeking his own
interest, in such a way as to make everyone better off... Economic order can
emerge as the unintended consequence of the actions of many people, each
seeking his own interest."

Comment

Well, what is wrong
with that statement?Not much if
we add a few words:

“A free market
[co-ordinates] the activity of millions of people, each seeking his own
interest, in such a way as to make everyone better or worse off than they would be if instead
a government, irrespective of the individual brilliance of its members, tried
to micro-manage the economy. Economic order or disorder can emerge as the
unintended consequence of the net effect of the actions of many people, each
seeking his own interest, which mayor may notbe to the public good.”

Omitting the
inserted words makes a great deal of difference and enables the Friedmans and Company
to assert that markets reconcile all self-interests – competitive and
monopolistic and including morally questionable selfish motives and behaviours - into socially beneficial outcomes .Smith called the latter a “licentious” theory.I agree with Smith.

Monday, April 22, 2013

Adam Smith: Left or Right?

He posts an
informative article on a very modern issue, basically on whether Adam Smith
leaned either to the “Left” or the “Right” (a somewhat anachronistic distinction,
given these distinguishing terms refer to the accidental location of whether
French revolutionaries who sat on the left or the right sides of the French
assembly meeting hall, a event after Smith died in 1790).

Amartya Sen (2009)
has drawn inspiration from Smith in developing his own theory of social justice
and Samuel Fleischacker (2004) has made the case for reading Smith as a
precursor of modern notions of social justice. Iain McLean (2006), on the other
hand, makes the stronger claim that Smith’s true legacy lies, not with the
libertarian economists of the Adam Smith Institute, but rather with the social
democrats of the John Smith Institute. In all three cases the broad claim is
that there are grounds for associating Smith with the modern egalitarian idea
of social justice understood as the state-backed redistribution of wealth to
ameliorate the effects of poverty.” …

…. That he is wary
of any automatic reliance on the political process and the state to pursue our
social objectives is admitted even by those such as Fleischacker who want to
reclaim Smith for the left. As Fleischacker (2004, p. 241) also admits, this
points us toward a presumption against the state and a presumption in favour of
private action by voluntary associations of individuals. But if this is the
locus for the exercise of beneficence and the provision of public works then we
are dealing with something very different from the modern debates about
intra-national transfers or even international transfers and distributive
patterns.

Craig Smith goes
on to say that what this implies for a ‘Smith-based’ notion of distributive or
social justice is clear,

we should take
more seriously Smith’s silence on modern distributive justice, his desire to
place conceptual distance between beneficence and justice, his distrust of the
political process and his temperamental distaste for utopianism. And we should
pay more attention to his localist, prudential category of police and his
desire to press a normative distinction between strict principles of justice
and political or beneficent decisions guided by expediency. These are not
accidental aspects of Smith’s thinking, however imperfectly they are carried
over into his own policy prescriptions. They suggest a very different
understanding of the normative ideal of justice and one that might actually
give us good reasons to doubt the efficacy of thinking about our moral
obligations to the poor and welfare provision in terms of social justice. …

… When thinking of
our moral obligations a related question about Adam Smith’s thinking is raised
by Maria Pia Paganelli in a chapter forthcoming in the Oxford Handbook on Adam Smith. Paganelli asks why Smith promotes
free markets and argues that he promotes them for at least two reasons:
efficiency and morality. In terms of morality Paganelli argues that Smith
thought that markets can foster morality just as much as morality can foster
markets. Paganelli concludes her chapter by noting:

“Adam Smith
favours commerce on grounds of both morality and efficiency. Commerce is
intertwined with morals, it supports moral development and at the same time it
is supported by it. Commerce requires morals for its functioning and gives the
conditions under which people can live, can live freely, and can live morally…

Returning to the
question of whether Adam Smith was “left or right” James Otteson writes in the
epilogue to his 2011 book Adam Smith:

‘He [Smith] was
instead an old-fashioned liberal: favoring individual liberty, endorsing state
institutions to protect this liberty, and, where they conflicted, favoring the
individual over the state as a default. But he was also a sceptical empiricist.
He favored free trade, free markets, and a government robust but limited to the
enforcement of a few central tasks not because they comported with a priori
principles but because they seemed to work.

It is worth noting
that this sceptical empiricist approach to markets, trade and government rather
than an a priori principle approach would most likely disqualify Smith as a
libertarian, at least of the Radian or Nozickean kind.

Otteson goes on to
say, “Smith’s concern with the poor leads some commentators to suggest that he
must have been a proto-“progressive” liberal, since, as some believe, only
progressive liberals care about the poor. Samuel Fleischacker, for example,
argues that Smith’s concern for the poor is one reason to see him as “left-leaning”
rather than “right-leaning”. Concern for the poor is, however, hardly the
exclusive provenance of the political left. And Smith’s strong arguments in
favor of decentralization of power, competition, and free markets would seem to
put him rather on the right of today’s political spectrum than on the left.”

Comment

[You must follow
the link to the “Anti-Dismal” Blog and read the entire post for an erudite
discussion of recent contributions by Smithian scholars at the highest levels
of scholarship.]

I have met and
discussed Adam Smith with all of the distinguished authors mentioned in the
post and have followed the issues they debate in recent years, including the
specific issues raised in the post.

Currently, I am
working on aspects of these issues particularly in relation to the Left”- “Right”
distinctions made in these debates and how they relate to the invisible-hand
metaphor and its modern connotations.

I am often asked
why I make such a fuss over a metaphor used by Adam Smith in the 18th-century.However, Smith’s use of the IH metaphor
is of underlying importance today given its prominence in modern debates on the
market-state’s roles and share in the GDP of all countries.

Moreover, the
protagonists in and around governments base much of their different perceptions
of how much is enough on the supposed roles in the success and failures of
whichever mix of proportions of State/market roles are permitted in their GDP on
supposed recommendations for or against by Adam Smith.Do we rely on the “invisible-hand’
of markets for most of our GDP or the “visible hand” of the state?Or do we raise questions about what is
meant by these categories?

Why do markets
need an “invisible hand” to operate when markets work perfectly well only by
very visible prices and could not work without their visibility?Why do states that work under
conditions of invisible power deals, personal ambitions, private invisible
lobbying – and not a little invisible corruption - become somehow categorised
as “visible”, apart from it being a term popular with politicians?

This is a rich field well
beyond interest in the search for Adam Smith’s politics.Even if he had been alive, I doubt if
he would have chosen to sit on the left or the right side of any Assembly.He did not have a vote in 18th-century Scotland
and would have been disinclined to exercise it even if had a vote.He believed that as a philosopher that his role was to “do nothing but observe everything”.

Saturday, April 20, 2013

Michael Fry Speaks Truth to Politics

Michael Fry writes in The Scotsman
(“Scotland’s national newspaper”, 18 April 2013HERE

“Money and morality an issue for us all”

“ADAM Smith would not have been a fan of a
government making its citizens’ moral judgments for them, writes Michael Fry.

In the time of Adam Smith, just like today,
Scotland had a problem with its fishing industry. There was not much money for
investment in that period, and the fleet was out of date – in particular, it
was no match for the European boats, usually from Holland, which made a habit
of coming into Scottish waters to catch the fish from under our lads’ noses.
Sound familiar?

Then, as now, the British government
considered that if Scotland had a grievance, the best thing was to throw money
at it. So the Treasury provided a subsidy (a bounty in contemporary language)
for building bigger and better Scottish boats to match the Dutch ones. Smith
was living in Kirkcaldy, so he knew all about these things from the fishermen
of Fife, and he wrote: “It has, I am afraid, been too common for vessels to fit
out for the sole purpose of catching not the fish but the bounty.”

I thought of this when I read a speech given
by Alex Salmond {Scotland’s First Minister in the Scottish Parliament] during
his visit to the US for Tartan Day last week. He was addressing an audience at
Princeton University, so the thoughts were suitably learned. They drew a
distinction between the Smith of The Wealth of Nations, with its advocacy of
capitalism (or something very like it), and the Smith of his earlier book, The
Theory of Moral Sentiments, which recommends altruism and benevolence – or, as
the First Minister horribly put it, “empathy”.

Salmond will always be a politician more
than anything else and, before closing his remarks, he drew some conclusions
from all this theory for the burning issues of today. One subject he turned to
was climate change and his government’s policies to deal with it.

The most controversial part of that
programme is wind farms. Even as I read Salmond’s speech, the Highland Council
was nodding through a proposal for a wind farm with 83 turbines to be built
above Fort Augustus, and so ruin another stretch of rugged scenery.

But hang on a minute, is it not possible to
discern a certain similarity between the fishing boats of the 18th century and
the wind farms of the 21st? In both cases, government decides they are a Good
Thing, not only in Scotland but “worldwide”. So it subsidises them.

The interesting thing is where the subsidy
goes. It goes not to the consumers of fish, nor to the consumers of energy. It
goes to the producers, to the builders of fishing boats or of wind farms – both
groups that then make large profits at public expense. It is in the end a
transfer of money from the powerless us to the powerful them, with government
the arbiter of this redistribution.

For all its reputation as a handbook of
capitalism, The Wealth of Nations is full of such examples of what today we
have come to call rip-offs. “People of the same trade seldom meet together,”
Smith writes, “even for merriment and diversion, but the conversation ends in a
conspiracy against the public, or in some contrivance to raise prices.” …

... Smith is a psychologist as much as an
economist, and for me the uncanniest part of his genius is to tell us, in every
case, what is actually going on. He was a cautious fellow, but his very caution
allowed him to read the reality of motives. And once he had read them, he was
always on the side of the small man likely to suffer from the presumption of
the rich and powerful. When he called for liberty, as he constantly did, it was
to secure the rights of the small man against the rich and powerful. …

… How did Smith propose to deal with the
abuse of liberty? To answer the question we must turn from The Wealth of
Nations to The Theory of Moral Sentiments, and there we can learn that morality
is not secured by the multiplication of laws, nor by the interventions of
government, which are both inevitably corruptible. It is secured not at a
public level but at a private level, in each person through the cultivation of
his or her own moral sensibilities.

Comment

[Disclosure: until my retirement in 2005, I was a member of the SNP and
I still am a donor (of small not large sums post retirement!) and I regularly vote for its
candidates. I can therefore address political problems in conformity with my
self-denying ordinance on Lost Legacy of not discussing politics in any country
except the one I vote in.In this respect,
I shall vote ‘Yes’ in Scotland’s Independence Referendum in August 2014.

I have been an academic associate of Michael Fry for 40 years.I do not know his politics, but I share
with him membership of the Tuesday Club in Edinburgh, a slightly
right-of-centre dinner club with members close to the social-democratic centre left
to the more conservative centre right, and those, like me, who straddle both trends
as a moderate Libertarians.]

Fry writes:

“For all its reputation as a handbook of
capitalism, The Wealth of Nations is full of such examples of what today we
have come to call rip-offs.”

How right he is.Wealth of Nations is as wildly misread (usually from
selective collections of quotations from it) and it remains as widely unread.Add to this unhappy situation the
awesome fact that Smith’s “Theory of Moral Sentiments’ (1759) is even more
widely unread than Wealth of Nations and we have a recipe for quite
astonishing degrees of ignorance about Adam Smith’s legacy.

Take the quotation about “People of the same
trade seldom meet together even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or in some contrivance to
raise prices.”

This often quoted passage is an apt description of
the baser habits of businessmen in commercial markets even today.

In Smith’s 18th-century Scotland,
he alluded to the behaviours of the Town Guilds, which shared, under
legislation, legal rights to engage in powerful monopolistic practices whereby
under the Statute of Apprentices (from Elizabethan times in the 16th
century) master tradesmen were restricted to two apprentices enduring 7-years
of training and the further restriction that to practise their trade as
fully-fledged tradesmen they had to be approved by the local Trade Guilds or
move somewhere else.These laws were
a license for the local Guilds to exercise a perpetual monopoly, or, in modern terms,
a “closed shop”.Monopolies raise
prices and restrict competition, which were common before Margaret Thatcher’s
governments abolished them in trades unions in the 1980s.

I liked the analogy Michael Fry develops
between the herring boat “bounty” and today’s wind-farm “subsidy”. I remain a
sceptic of 1990s “global warming”, recently changed to “climate change”, and
soon, I suspect in view of the extraordinary cold winter here in Scotland, to become
“global cooling”.Nevertheless,
Fry’s analogy deserves consideration.

I commend Fry for spotting the important
point Smith made on Liberty: “When [Smith] called for liberty, as he constantly
did, it was to secure the rights of the small man against the rich and powerful.”

This is absolutely right!Those who read into Smith a passion for
laissez-faire (leave alone) misunderstand him.

Firstly, Smith never used the French words, rightly in my view as a cry on behalf of merchants, not their
consumers.M. Le Gendre, “a plain
spoken” merchant, in 1690 answered dirigisteFrench Minister, M. Colbert, when asked what he
wanted, replied ‘Laissez-nous faire”.At the time, the French administration tightly controlled by hosts of
regulations everything that merchants could do in practice.They wanted freedom to run their
business affairs entirely themselves.Their customers were not asked what they thought.

Secondly, English mill and mine-owners
supported ‘laissez-faire” for themselves, not their employees or ocmpetitors, when they
supported campaigns for the Repeal of the Corn Laws (to reduce high food prices
and thereby industrial wages) and the early Factory Acts that restricted hours
of work and the introduction of modest safety measures, especially for women
and children.

From these misleading associations,
classical economists promoted “laissez-faire” in their textbooks and sank its
roots into their political economy, including spreading the general and false view that Adam
Smith advocated laissez-faire.Even today, in neoclassical economics, the identification of Adam Smith
with laissez-faire is commonplace

I recommend that you follow the link to read
Michael Fry’s full article.